Igal Mayer was three weeks into his post as the new chief executive of the UK’s leading insurer, Norwich Union (NU), when the summer floods wiped out half the company’s profits for the first six months of the year.
“It wasn’t a case of oh s***—half your profits have gone,” says Mayer, an affable Canadian. “It was more about the eight million promises we had made out there…and fulfilling the many thousands of them.”
Mayer says he was very hands-on from the start. “We staffed up over a long weekend in June and I went to Gloucestershire to assess the situation.”
Along with a ‘war team’ Mayer then set about ensuring that NU’s service of care was as efficient as it could be, given the circumstances.
In the subsequent months, Mayer has had more time to reflect on the crisis and the issues surrounding it, and to take a long hard look at the state of the UK insurance market and the dynamic set of challenging market factors that his business faces.
“We are engaging with government on a number of issues and there is obviously a common theme [flooding]. I don’t believe the lobbying effort is adequate. This shouldn’t be just about relying on the public sector, it is about how we engage with industry as a whole.”
Mayer says he is passionate about championing the issue of innovation within the construction sector and, in particular, the methods for building on flood plains. “Withdrawing cover is not an option; it’s not a negotiating tool. We need to work with the constructors to innovate.”
He refers to construction techniques overseas where houses are built on an elevated platform to counter the forces of nature, and believes that type of innovation should be the future for home-building in the UK.
“It wasn ot a case of oh s***, half your profits have gone.
Igar Mayer on the July floods
In his first five months, Mayer has restructured his top management team and has been reviewing the broker distribution model in the UK very closely.
“We’ve stepped back to see what is happening and landed in a different place to others. We’ve concluded that the best products for consumers are best provided by an independent broker, which can provide the best advice.”
Mayer’s strategy is to target high street brokers (owner-occupiers) and provide them with a succession-planning advice service that could include providing debt financing to help them to sell on their businesses once they want to step back.
“The aim is to help them to sell to their children or the people in their office.”
He adds that he does not really want to buy stakes in brokers despite having taken stakes in Giles and Jelf. “And with regional brokers we can provide M&A support. We want to stay out of managing their businesses, but we can help them to remain independent, which we believe is the best deal for customers. We can help put people together,” he adds.
The final part of Mayer’s strategy is “to play with large consolidators, like Towergate”.
Mayer refused to reveal exactly how much volume Towergate puts through NU, but it is understood to be around £400m. He accepted that if a company like AXA were to buy Towergate, it would leave a hole in his accounts.
“It is a major risk and we manage that risk by continually evaluating our relationship with Towergate and hope it will remain independent.”
“We have stepped back to see what is happening and landed in a different place to others.
Igal Mayer on distribution
He adds that the risk is also managed by the previous strategy of closely managing and helping the distribution channel.
Mayer refuses to be drawn on whether he has raised the issue of insurers buying brokers and the effect it would have on the market with the FSA, but he said he had raised it informally with other people in the market.
“Yes it is clearly an interesting and sensitive point. Yes we have raised it with folks [in the market].”
He refuses to name who, but says: “It is clear that some rules of the game need to be defined.”
Clients need to know the ownership of the companies they are dealing with, he says, adding that the same rules would apply to the firms that NU provides financial assistance to.
Mayer has seen the ‘tied’ insurer/broker model operating in Canada and doesn’t believe it is the right way for the market to go. He asserts that there will always be a market edge or entrepreneurial spirit in the market that encourages competition.
So where will the market be in five years? “I believe with a strong and independent broker market,” he says.